Budgeting for gifts: Use one credit card, or money in an envelope

It happens every year. You end up going over budget with your holiday spending, adding more to your credit card debt. But there are ways to prevent spending too much and even saving with a holiday spending plan.

Paul Oster, CEO of Better Qualified in Eatontown, said the time to start planning for next year's holiday spending is right now. If you haven't done it for this year, then the odds are, unless you really set a goal, you will overspend.

The best thing to do is to open up an account now, said Oster. Allocate a small percentage of your income that's going to be directed toward next year's holiday expenses.

To stay on budget this year, Oster said, first analyze your debt. The last thing you want to do is put any more debt on a credit card, which he understands may be unrealistic.

"You should really have a three-month plan to pay off any of the debt that you're going to incur during the holiday season," said Oster. Figure out how many people you have to buy for, divide up the money you do have among those people and only spend that. He said not to forget about hidden expenses: That could mean a new outfit for holiday parties or travel.

Oster said sometimes you have to go back to the envelope system. If you put enough cash in each envelope for the people you're buying for, once the cash is gone, then it's over.

You can also get some gift cards for the people you're going to buy for this season: Once the gift cards are empty, then the spending is over.

He said using a debit card when doing online shopping should be a last resort because there's not enough security using a debit card.

"Every financial decision is based on emotions," said Oster. During the holidays, our emotions are at an all-time high so we tend to forget that we should be on a budget and we shouldn't overspend.

Going over 30 percent on your credit cards will drop your credit score significantly so it will wind up costing you more money for everything else in higher interest rates, said Oster. If you don't pay it off in three months, then a $100 gift soon doubles and becomes $200.

Oster said the best thing to do is use one credit card. It's easier to track how much you've spent instead of sprinkling purchases to other cards. When you are paying off a card, Oster suggested putting the money toward the card with the highest interest rate. Pay that off, then move on to the next card, then the next card. It's called "debt stacking" and Oster said it's been mathematically proven to be the fastest way to pay off credit card bills.

Buying for you own children is the most important expense during the holidays. Oster said most kids remember trips more than gifts. So maybe plan for a trip in 2019, which gives you time to save.

If you're really on a fixed income, he said for everyone else on your list, give them a handwritten letter, homemade crafts, cookies, breads and pies. People will remember those gifts because they are from your heart.